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United States Senate



Non-Foreign COLA Update

Since 1948 federal employees in the non-contiguous areas of the U.S. have received Non-Foreign COLA to ensure that their pay reflects the high cost of living. COLA is not subject to federal or Social Security/Medicare taxes. In 1990, the Federal Employees Pay Comparability Act (FEPCA), included provisions for what is termed locality pay which is paid to federal employees in the contiguous United States. Unlike COLA, locality pay is taxed and considered part of base pay, which is used to calculate an employee's retirement annuity. Another difference is while COLA reflects a cost-of-living adjustment, locality pay reflects a comparison of federal salaries to private sector salaries in specific geographic areas. A third difference is that U.S. Postal Service employees receive Non-Foreign COLA if employed by the Postal Service in the non-contiguous areas. However, postal employees in the contiguous United States do not receive locality pay.

Frequently Asked Questions (FAQs).

Text of the administration's proposal to replace COLA with locality pay.

U.S. Office of Personnel Management's "Non-Foreign Area Cost of Living Allowance (COLA) Transformation" powerpoint presentation.

Calculator to determine federal employees' change in pay and retirement under the Administration's proposal, provided by the Office of Personnel Management.

Comparison of Hawaii employees' pay and retirement with employees in San Francisco under current law and the Administration's proposal.

Information on the number of employees in each pay grade in each of the non-foreign areas.

On May 30, 2007, the Office of Personnel Management sent its legislative proposal to Congress that would phase-out the Non-Foreign Cost of Living Adjustment (COLA) and phase-in locality pay for federal employees in Alaska, Hawaii, Territory of Guam, Commonwealth of the Northern Mariana Islands, Commonwealth of Puerto Rico, and the U.S. Virgin Islands. The President proposed the change in compensation policy as part of his Fiscal Year 2008 budget. 

On May 13, 2008, Senators Akaka, Ted Stevens (R-AK), Dan Inouye (D-HI), and Lisa Murkowski (R-AK) introduced S. 3013, the Non-Foreign Area Retirement Equity Assurance Act of 2008 (Non-Foreign AREA Act), to address unanswered questions in the Administration's proposal and advance the discussion on COLA and locality pay. 

Senator Akaka's Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia held a series of meetings and a hearing in Hawaii in May 2008 to discuss these proposals. 

Press Release: Senators Introduce Legislation to Ensure Fair Retirement Benefits for Federal Workers in Hawaii, Alaska and U.S. Territories

Senator Akaka's statement introducing S. 3013, the Non-Foreign Area Retirement Equity Assurance Act of 2008

Section-by-Section analysis of S. 3013

Full text of S. 3013

On June 25, 2008, the Senate Homeland Security and Governmental Affairs Committee passed S. 3013.  Two amendments were adopted by the Committee.  The first was a technical amendment offered by Senators Akaka and Stevens to clarify various provisions of the bill.  The second, offered by Postal Subcommittee Chairman Tom Carper (D-DE), altered the way postal employees would be treated under the legislation. Under the bill as amended, all current and future postal employees in Alaska, Hawaii, and the non-foreign areas would continue to receive Territorial COLA (T-COLA), but the way T-COLA is calculated would change.  As such, postal employees would receive the greater of the T-COLA rates in effect on December 31, 2008, or the locality pay rate in effect for that area.  No employee would receive less than their current T-COLA rate and the 25 percent cap on T-COLA would be removed.

Akaka Stevens Amendment to S. 3013

Carper Amendment to S. 3013

Akaka 2nd Degree Amendment to Carper Amendment S. 3013

S. 3013 Calculator with 3 year phase-in, 65% offset

Click here to contact Senator Akaka


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